by: Roger Guzman, M.D.




College financial planning should start early. In fact, do it as soon as the child is born. There are benefits to doing this. For one thing the longer time frame will allow some flexibility. You can be more aggressive in pursuing the best return for your money.

The question that begs to be answered is this. How much should one save for college? The College Board says the cost is more than $32000 annually to attend a private university and college. The annual cost in public universities and colleges is much less, around $13,000.00 per year. And it is rising every year at more than the inflation rate.

Everybody in the family should get involved in college financial planning. The kids who are college-bound should think of their educational goals. Answer questions like what do they want to study? Where do they plan to go to university, public or private? In which state do they want to go for this?

After getting the answers, then the kids should investigate the prices at every school they are planning to go. Have more than two colleges in mind for one never knows where he can be accepted. For example I'll laugh if President Obama's safety school is Harvard. Once you have the college cost at each school, it will be easier to see how much money to set aside.

The college-bound kid can also help check out the opportunities in terms of financial aid that is available to them. Have a meeting with the librarian or the guidance counselor in their high school to find out how to access funds for college.

What you will find out is that saving more will be quite necessary So how do we do that? Well, save more and spend less, that's what. The whole family can help. Eating out once a month instead of every week will obviously help save hundreds of dollars very month.

Buying a second-hand car instead of a shiny new one will save thousands of dollars that you can set aside for college. Stop maxing out your credit cards for the interest rate will be horrendous. In fact, transfer the balance to a low-interest card, and stick to the payment plan.

Where do you park all the money you are saving for college? By this time, you are richer than what you think but you will be richer still if you put it in the right place. The government is on your side here. Believe it or not, the government wants to help you save.

Skeptical? Don't be because the government has set up two ways to help you save in a tax-advantaged manner. One is the Coverdell Education Savings Accounts where you can park the money that will earn interest that will not be taxed. It will allow one to withdraw funds for any educational expenses tax free.

The second one set up is the Section 529 College Savings Plans. You can lock in the college cost at today's rate. Let's say college cost is $13,000 annually. Well if the baby is new born you can save $10,000.00 every year at the $13,000 tuition rate even if the college cost when the baby is ready to go to college has gone up to $50,000.00 a year. Cool, huh?

The only trouble with the 529 plan is that only some schools allow this. So, are there other ways to pay for college? Of course, there are other ways; we just have to dig deeper. So bring your spade and let's do some digging, shall we?

There is a law called College Cost Reduction and Access signed where a new repayment plan will be based on one's income, thus making it easier to afford the federal loans. And listen to this, those who consolidate there loan can do it at an interest rate of 2%.

So remember, sign up for IBR (income-based repayment) plan, consolidate loans at 2%, and sign up for a tuition payment plan where you can split the annual cost into 12 equal monthly payments. All are worth investigating for they are part of college financial planning.

Abstract: College financial planning will help ease the burden of the educational cost facing families today but there are solutions to the challenges. Credit woes may hold back the college-bound but careful research and work around all angles will offset the cost of higher education to make college a reality. Start as soon as you can so that if there are unexpected gaps, they can be easily filled in with time and effort on your side. It goes to show that while we cannot lower the cost we surely can reduce its impact.

Keywords:
college financial planning, financial aid, 529 College Savings Plans, Coverdell Education Savings Accounts, income-based repayment, low interest rates

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About The Author
Dr. Guzman worked for the Atlantic Health Corporation and was consultant to St. Joseph's Hospital, Sussex Mental Health Clinic, and St. Stephen Mental Health Clinic for many years. He was Director of Forensic Psychiatry at Centracare for ten years and published numerous articles, including financial ones in the Journal of the American College of Forensic Psychiatry and other medical magazines.